Someone is ringing a tiny silver bell. It’s tea time for the employees of Tuft & Needle.
Two dozen young, carefully groomed men and women wander over to a table heaped with finger sandwiches and flaky croissants. Dressed in shorts and jersey skirts and polo blouses, they look less like a gathering of businesspeople than the residents of an especially glamorous youth hostel. Pretty much no one is wearing a shirt with a cuff or a button. It’s apparently sandal season.
As these handsome youth help themselves to beignets and clotted cream, I eavesdrop on conversations punctuated with phrases like “Seriously, dude” and “I’m all” and “I know, right?” No one mentions selling mattresses, the raison d’être of the local, high-profile start-up they all work for.
“We do this every Monday,” Daehee Park tells me, dropping into an overstuffed chair on my left. Park is the 27-year-old co-owner of Tuft & Needle. He’s wearing a white, V-neck undershirt, flip-flops, and a baseball cap. “Once our Grand Avenue offices are completed, we’ll have weekly tea over there.”
Oh, I think to myself. This is their version of the ping-pong table in the break room. Casual Friday, every day. That 21st-century business model that gets more out of workers by blurring the line between work and fun.
Park looks concerned. “You’re not drinking tea.”
“Oh, yeah, I’m okay,” I assure him.
“You have to try the mazagran,” he says, excusing himself to get me a glass of coffee with lemonade. The impressively bearded fellow I’ve seen moving from group to group, chatting amiably, slips into Park’s seat. This is JT Marino, Park’s 30-year-old business partner. He wonders if I have everything I need. Have I tasted the melon salad?
“I’m good,” I say. “But I’m not hearing much talk about mattresses.”
“That’s because the mattress is our widget,” he explains. “These people want to be involved with something that matters, and they want to be around other smart people. They want to master something. It’s not the mattress that’s drawing them to us, it’s solving the problem of the major unfairness in the mattress industry. It’s working for a really great company in a really great city.”
“Our product is really good, too,” says Park, who’s just returned with an icy glass for me. “We spent a lot of time creating a solid, really affordable mattress. We really believe in it. But we’re looking at the bigger picture, too.”
That bigger picture is hard to miss, just lately. Tuft & Needle’s in-your-face ad campaigns are pretty much everywhere, alternately shaking a finger at the mattress industry and trumpeting Phoenix as the best place anyone could ever hope to live or work in. Their startling and very public love letter to the city has appeared at CityScape, at Phoenix Public Market, and across from Chase Field, on billboards proclaiming “We Believe in PHX.” The ads tag a new website, phxbuilt.com, where startups can documents the joys of settling down in Phoenix.
Any yokel can appreciate an ad dissing the competition, but anyone who’s lived in the Valley of the Sun for more than a month is going to be suspicious of a couple of transplants from Silicon Valley who appear to dig Phoenix more than their own northeastern Pennsylvania hometowns. They’re proving their love by buying and restoring a block of historic buildings in the warehouse district; with a website that ballyhoos Phoenix as the next startup capital; and with those “We Believe in PHX” billboards.
Either Park and Marino are as into our city as they are selling a better queen size, or they’re savvy out-of-towners using our civic pride to launch their money-making take on the Posturpedic.
Either way, Phoenix wins.
About halfway through high tea, Park and Marino amble into one of the conference rooms at Mod PHX. This co-working space at Central Avenue and Thomas Road is the company’s home away from home during renovation of the former Grand Avenue hardware store they’ve purchased. Tuft & Needle will be headquartered there this fall; in the meantime, they’re renting a warehouse on Grant Street and taking meetings, like this new-hire orientation, at Mod.
Marino walks around a long conference table, shaking hands with a half-dozen new employees, asking each about their last job. This one was a social worker; that one taught special ed. No one mentions mattresses or having worked in sales.
“None of our people come to us from the mattress industry,” Park had told me earlier in the day. “Those guys don’t want to work for us, and we don’t really want them here, either.”
“I usually wing these meetings,” Marino admits to the crowd. “So, what do you guys want to know about this company?”
After a brief pause, a young woman gasps: “I mean, like, everything!”
Everyone laughs. Park settles into a chair while Marino launches into the Tuft & Needle story — about how he and Park cofounded the mattress-making company in 2012 with just $6,000 and a desire to leave their less-inspired careers in software engineering. And how they turned down offers from venture capitalists interested in Tuft & Needle’s early success, opting instead to borrow a half million dollars from Bond Street, one of a new breed of alternative lenders that promotes new business models.
“We knew having investors meant giving up control of how the company is run,” Marino tells his hopeful staffers. That company was inspired by the nasty experience of buying what he calls “my first adult mattress,” and the discovery that this mattress, made up of what he estimates to be about $300 worth of foam and springs, had cost 10 times as much. It was, Marino says, “that jaw-dropping moment for Daehee and me.”
He’s only getting warmed up. “I’d just gotten married. Three thousand dollars was the most I’d ever spent on anything other than my computer. It was really hard to research mattresses online, and really confusing when my wife and I went to a mattress store, because the guy was just trying to sell us something expensive.”
Marino’s mattress arrived a month later, on a filthy truck. The deliverymen dragged his $3,000 investment through his apartment, leaving a muddy trail behind. “We slept on it for a couple weeks,” he tells his staff. “And we hated it.”
A bitch session with Park, Marino’s best friend from Penn State, led to a larger discussion about taking on the $15 billion mattress industry, which for decades had been dominated by household names like Sealy, Serta, and Simmons. These companies, Park says, were selling the same mattresses at four different price points, mattresses that he says are made of the same old stuff and marked way up past their value.
After much complicated mattress re-engineering, the pair came up with a straightforward sales approach: Tuft & Needle would offer a single, high-quality foam mattress in a few different sizes, assembled in California and sold directly to customers via online sites. There would be no confusing in-store comparisons overseen by commission-driven snakes, although buyers would have the option of visiting a showroom to test-drive a T&N model. Mattresses would arrive in the mail and have a hassle-free return policy. Prices would range from $350 to $750, depending on mattress size.
The partners knew that launching in Silicon Valley, where both were living and working — mostly working, and way too much, they now admit — would be expensive and require exhausting amounts of their personal time. But setting up in a more economically friendly city would give them a leg up. “There wasn’t one silver-bullet reason, but rather a constellation of them, a whole series of practical, cultural, and philosophical things,” the partners write in an essay posted on their company website about why Phoenix beckoned.
They set up shop in Arizona in 2012, first in a tiny Tempe space, and later in one of developer Michael Levine’s warehouses on Grant Street. When they outgrew that, the duo bought the 100-year-old, 36,000-square-foot O.S. Stapley building on Grand Avenue, which they’re renovating into a showroom, storefront, and offices that will include a public café and an inside basketball court.
Marino wraps up his history lesson with the startup’s financial victories: Year One scored Tuft & Needle its first million; by 2014, its revenue was nearly 10 times that. Last year, the company piled in $42 million; this year’s coffers are expected to contain somewhere between $125 million and $225 million. The company has grown from four employees to 110, most of them here in Phoenix.
As the trainees file out, clutching brand new MacBook Air tablets, I ask Park how the mattress industry has responded to T&N’s out-of-the-box boffo sales.
“At first, they didn’t take us seriously,” he admits. “Two years ago, we spoke at this national mattress convention, and after we finished talking about how we’re going to do things, there was silence. This year we went back, and every one of the major brands was there with a new ad campaign that looked a lot like ours.”
Long-established sleep companies are ripping off more than T&N’s advertising designs. Sealy claims its Cocoon mattress was years in the making and unlike any other, although its design and marketing appear to borrow wholesale from the T&N model. Venture-funded Casper launched in 2014 with a nervy slogan (“Changing the way people shop for mattresses!”) and a lot of crowing about how — huzzah! — they only sell one mattress. The new Dream Bed line from Mattress Firm trumpets two-day mail delivery and a six-month return policy — both concepts that Park and Marino offered a couple years before. (When I ask, in an online chat with a Mattress Firm agent named Nicholas, if the Dream Bed is a Tuft & Needle mattress, he replies, “They are not the same mattress, however they do seem to have similar features!”) Each of these companies is offering product that’s at least twice as expensive as Tuft & Needle’s.
Park isn’t worried. The big guys, he says, will always be a year behind his company. “Their attitude is, if two young kids can do it, why can’t we? We think they can’t because of that attitude. Rather than trying to learn from what we’re doing, they’re just stealing our ideas. By the time they roll them out, we’ve already moved on to the next idea.”
More telling than all this alleged industry thievery is the number of acquisition offers T&N has received. “We want to be respectful,” Marino says of the mega-companies that come sniffing around. “So we tell them we don’t want to sell, we don’t want to share our secrets. We don’t tell them we want to stay around to fix the mattress industry, to heal it.”
They also want, Mark Kinsley says, to disrupt it. “They’re succeeding because the system for buying mattresses is broken,” according to Kinsley, vice president of marketing for the bedding group Leggett & Platt and an executive editor of Sleep-Geek.com, an industry website.
“For the longest time, the only way to buy a mattress was to go to a bedding store with a station wagon. There wasn’t much attention to customer service, and there was a lot of deliberately confusing sales techniques being used. These guys came along and said, ‘We’re going to sell a single product, and we’re going to make sure our customers fall in love with the experience of buying it.’ It’s working.”
Park says the mattress industry is bizarre and riddled with laziness. “It’s a lot of older white guys, with almost no women or racial diversity. The principals aren’t creative, they’re people who want to be in meetings all day, hiring and firing. They don’t want to be creative. The product is stale and made from the same materials they’ve used forever. We’re doing something different, and we want them to do the same. I don’t know if we’ll become the number-one company or not, and I don’t care. What we want is for the industry to change. People shouldn’t have to hate buying a new mattress.”
I am pretending to shop for a mattress. I’m alone in this glass-fronted, street-side bed store in Central Phoenix with a guy named Mark who made a beeline for me as soon as I entered. Dressed in a blue serge suit, Mark looks like a 1946 Pontiac, all shiny angles and flashing orbs. His sales pitch has the appeal and whine of a dentist drill. His waistline and his breath suggest that he has been eating a lot of something involving peanut butter.
Mark wants me to lie down — but only on the “good” mattresses. “That other stuff, that’s not for you,” he explains, waving a hand in the direction of most of his inventory. “Those are for college kids. An older guy like you, you want a good mattress.”
After hopping on and off mattresses in a room full of signs printed in colors that are burning pinholes in this older guy’s eyes, it’s not hard to act confused. “Just what exactly is the difference between this one and that other one I was just lying on?”
“This one has memory foam,” Mark offers.
“What does the other one have?”
Mark shrugs. “It’s got memory foam, too. But, you know, you get what you pay for.”
I see. “Do you have any Tuft & Needle mattresses?”
“Hmmf!” Mark the Pontiac replies. “No, we don’t sell those here. But that’s not really a mattress, see?”
What is it, then?
“It’s an inflatable,” Mark explains. “It comes with a little bicycle pump or something. You don’t want to sleep on that, it’s like a pool raft. You drop a pair of scissors on that thing, it’s gone.”
After promising not to sleep with scissors, I turn to go. Mark follows after me, offering a 10 percent discount if I buy before the end of the day. As I start my car, I’m afraid Mark is going to throw himself on the hood. As I drive away, he’s still talking about lumbar support and latex foam and wool fiber padding. I swear I smell peanut butter.
Tuft & Needle’s new Grand Avenue storefront is on my way home, so I stop in. A concierge greets me, then introduces me to a man named Michael, who’s wearing neatly creased shorts and a Lacoste shirt. I own pillowcases older than Michael, who speaks to me like we’re old friends.
“Would you prefer to be alone?” he asks, after ushering me into a spartan, IKEA-inspired fake bedroom.
Yes, typically, I think as Michael slides a big pine door closed behind him. Not having been asked to lie down, I feel like a naughty houseguest as I stretch out on the tightly dressed mattress. Overhead, a framed black-and-white line drawing gently suggests I “Wake Up Better.” After a few minutes, I decide that the Tuft & Needle mattress feels nice, but not much different than my pillow-top at home. I go looking for Michael.
“Hey!” he says when I find him. “Can I get you a bottled water?”
I ask a couple of mattress questions, including whether Tuft & Needle mattresses come with a bicycle pump. It’s apparent by his polite response that Michael is accustomed to answering queries like this one.
“No,” he tells me. “It comes vacuum-sealed in plastic. You unbox it and it just expands.”
We talk about pillows and bed frames for a while. A T&N mattress will last about 10 to 15 years and lose less softness than a typical memory-foam mattress, Michael explains. I’m waiting for him to try to sell me something. Instead, he wraps things up by saying, “If you decide you’d like to buy a mattress, you can do that online, or you can come back here and anyone at all can help you. Whichever you prefer!”
The company’s accolades are pretty much unanimous. Out of 77 Yelp! reviews, 73 give five-star ratings. The company’s Amazon rating averages four-and-a-half stars out of five, and they’re consistently the best-selling bed on that site. Only on the mattress-review site www.sleeplikethedead.com, where consumers vote on things like “edge support” and “firmness options,” does Tuft & Needle turn up as something less than a superstar, with a middling C-plus rating.
Marino and Park don’t share their unit sales numbers with me, but they seem to like talking about how their beds are made of the same stuff as more expensive foam mattresses. Mostly, they like talking about how great Phoenix is.
“I’ve seen the billboards,” I remind them. I’ve also read the duo’s recent online essay titled “Why We Chose to Build in Phoenix and Not in Silicon Valley.” Published on PhxBuilt.com, it ticked off their Valley of the Sun fave raves: easy access to city leaders, reasonable property taxes, the lack of traffic, consistent weather, cultural diversity, a burgeoning restaurant scene, and a comparatively low cost of living.
None of the company’s “We Believe in PHX!” billboards mention mattresses, nor do much to promote Tuft & Needle outright. An earlier and ongoing campaign, featuring the company’s name and logo, is more to the point: “Mattress Stores are Greedy,” dozens of billboards declare, all over town. “Learn the truth.” The internet is littered with cheeky YouTube videos and clever pop-up ads proclaiming the joys of buying a Tuft & Needle bed.
For those of us who love our town, all the rah-rah-Phoenix stuff is sort of touching. But is it sincere? Does this friendly pair of Silicon Valley whiz kids really, as Sally Field might say, really like us? Or are they just thrilled to have found a place where they can launch their startup on the cheap?
Park’s response includes a lot of business buzz phrases, like “siloed” and “reversing the trend,” but he eventually gets around to the bottom line. “It’s true. If we’d started in Silicon Valley, we would have had to raise a lot of money. It would have been hard to convince anyone to join a mattress company. We couldn’t have paid competitive wages, rent would have been expensive, our employees couldn’t have lived as well as they can here.”
In Phoenix, Park didn’t need to hire an attorney to register Tuft & Needle. The Community and Economic Development Department helped the partners navigate city services and hooked them up with city staff willing to collaborate on fast permitting and additional parking. That wouldn’t have happened so easily, he says, in most other big cities. But do they really love Phoenix? I keep asking.
“I can understand why you’d be suspicious,” Marino finally replies. “I guess we could be just saying we really love it here, but for marketing purposes, it’s not the best use of our time to lie to anyone. By giving back, we’re telling a story that resonates well with businesses here and abroad. It’s a lost opportunity, for us, if we don’t give back to the city. We see some of the drawbacks that are here, but every city has them. We just really love Phoenix.”
“I don’t know that I’d call them disingenuous,” Brad Jannenga, another startup professional who’s settled in the warehouse district, tells me when I ask if these guys are for real. “They’re certainly opportunistic, but they’re good guys. The points they’re making about Phoenix, the quality of life and the business opportunities here, that’s all real. They’re embracing it, but they’re also beating the drum about what’s happening in the ecosystem here, so that others in the wider business community can hear. We want to attract other big, successful companies to the area.”
Jannenga and his wife, Heidi, co-founded WebPT, a locally based company that provides management software for physical therapists. WebPT has been the fastest-growing company in Phoenix for three years running, but when Jannenga founded the company in 2005, he wasn’t sure he’d made the best decision. “I went to U of A,” he explains, “and I left for California as soon as I got my degree. Arizona didn’t have the technology landscape I needed at the time.”
It does now — or it’s about to, anyway. Jannenga sees an influx of startups headed our way, companies that once might have settled in Austin, Boston, or Silicon Valley. Downtown’s warehouse district is already home to the digital marketing agency Moses; Dudley Ventures, a financial company; CCBG Architects; and event spaces like Bentley Projects, Angelic Grove, and The Duce. Most are members of the Warehouse District Council, a group working to attract businesses and developers to the area and navigate the nuisance of renovating a big old building and to, as Jannenga puts it, “perpetuate the vibe” of the area.
One reason for this beeline, he says, is a new business model that’s about creating jobs employees can love.
“No more strip malls,” he says, “where you work for 30 years to get a gold watch. We’re going to buy cool old buildings, renovate them, and put awesome restaurants in them. Instead of tearing stuff down, we’re going to give a nod to our past but also be forward-thinking about the success of our companies.”
But most of these are local businesses; startups that debuted here, that grew and evolved here. Can their successes lure the national business community to a city with a less-than-sophisticated reputation?
“Absolutely,” Jennifer Mellor assures me. She’s the vice president of economic development at the Greater Phoenix Chamber of Commerce, so I figure she ought to know. There are two reasons, she says, that Phoenix is about to become the new national hub for startups. New businesses here have the opportunity to work with the City, the mayor, and the Industrial Development Authority in getting established. “It’s pretty rare that you’ve got practically the whole community behind your business plan,” Mellor says. “And the other new thing is this trend in business people helping other startups, instead of competing for attention or trying to get more space.”
Tuft & Needle has nothing but more space. Marino takes me on a tour of the enormous, rambling Stapley building on Grand, where elaborate renovations by the company’s in-house designer are about to commence. Here is where the check-in desk will be. Just inside the door there, a café will serve mochaccinos to employees and anyone else who wanders in. Offices and meeting rooms will be in this next suite, over here. And back there, because they can, they’re building a half-size basketball court. A-ha, I think. There’s that ping-pong table.
Earlier in the day, Marino had confided that there were things about Phoenix he and Park hadn’t seen coming, things that took them by surprise.
“You mean like Beatrice Moore?” I’d asked. The pair exchanged glances, then burst out laughing.
“Well, yeah,” Marino admitted. “We were naïve about things like, you know—”
“People who don’t want any old buildings torn down on Grand Avenue?”
“Yes,” Park mock-groaned.
No one had told the business owners that Phoenix has its own historic preservation watchdog who monitors the well-being of every edifice on the street where they’d just settled.
“We’re not developers,” Marino explained. “All we knew was we’d bought an incredible building that no one wanted because it had no parking. We solved that by buying this other building down the street that wasn’t historic. It was stuccoed over and not really notable. We planned to tear it down and put a parking lot in.”
Not long after, Moore came calling. “I heard they were going to tear down that beautiful butterfly bow-truss building, and I went into a frenzy,” she told me when I called to dish about her new neighbors. “I met with them and explained how hard we’re fighting to keep these old buildings. I said how it would hurt their connectivity to the rest of the street. I showed them pictures of how ugly some of the buildings on Grand were before people fixed them up.”
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Moore takes a deep breath. “I took them on a tour of the neighborhood. And then I asked them to think about what a strong signal it would send to the startup community if Tuft & Needle was willing to save a vintage building. I reminded them that they’re telling everyone in town how much they love Phoenix, and here was their chance to prove it. To say to the developers, ‘Look, we didn’t tear this part of Phoenix down, we saved it.’” She lets out a little laugh. “I can be pretty shameless sometimes.”
Marino was moved by Moore’s devotion to Grand Avenue. “I was blown away by how much Beatrice obviously loves that building,” he says. “Of course, now we realize she loves every building on that street. If we have to demolish that building to create parking for our employees, we will. If we can find a way to save it, we will.”
Although they’re talking about maybe one day adding showrooms in other cities, and have launched a line of bed pillows, Marino and Park continue to resist the lure of the investors who still come calling.
“We want to build a company where we can work for the rest of our professional lives,” Park says. “We’re not doing Tuft & Needle so we can turn around and sell it next year. If that’s what we wanted, we could have done it better in some city other than Phoenix.”